IN BRIEF

Panic selling can create opportunities for long-term managers with discipline and stock selection expertise to buy stocks that they previously thought were too expensive. Our Emerging Markets Equity team is revisiting their portfolios and looking to add to high conviction ideas whose share prices have corrected to attractive levels.

Historical analysis suggests that investors can potentially enjoy significant upside when entering the markets at low Price to Book levels.

Following last week’s devaluation of the Chinese Renminbi and persistent weak macro data in China, we saw a sharp correction in markets today, led by China A-shares, which corrected by 8.5% in local currency. Other Asia Pacific and Emerging Market equities have also retraced sharply, and currencies have generally been weak. Following this correction, the MSCI Emerging Markets index is now trading at 1.28x (Guide to the Markets — Europe p.42, chart included below) Price to Book (P/B), and MSCI Asia Pacific ex Japan is trading at 1.34x. We believe downside is limited from here.

Historical analysis (using past 20 years of data points) suggests that investors can potentially enjoy significant upside when entering the markets at such low Price to Book levels. (Guide to the Markets — Asia p.38, chart included below)

For MSCI Asia Pacific ex Japan, the 12-month average return subsequent to entering the market at 1.3x P/B is 64%

For MSCI Emerging Markets, the 12-month average return subsequent to entering the market at 1.3x P/B is 49%

For both indices, return is skewed towards the upside (ie. chances of upside is bigger than the downside).

In my three decades of investment experience in emerging markets, panic selling always creates opportunities for long-term managers with discipline and stock selection expertise to buy stocks that they previously thought were too expensive. We are revisiting our portfolios and looking to add to high conviction ideas whose share prices have corrected to attractive levels.

We have been investing in the EM and Asia Pacific regions for over 40 years, and we have been through multiple crises and seen markets fall 90% in some cases. As it is important to think long-term, we have maintained our commitment to those markets, and we will continue to invest in our people and teams to build our expertise regardless of short term fluctuations.

Source: (All charts) FactSet, MSCI, J.P. Morgan Asset Management. Linear regression of price to book ratios on next 12 months' price return from September 1995 through June 2015.Guide to the Markets — Europe. Data as of 24 August 2015.

APAC ex-Japan and emerging markets: Evaluation analysis

Source: (All charts) FactSet, MSCI, J.P. Morgan Asset Management.
The total sampling size since September 1995, data permitting, included in the analysis are 238 months for MSCI Emerging Markets and 236 months for MSCI AC Asia Pacific 3x-Japan.
Guide to the Markets — Asia 3Q 2015.
Data reflect most recently available as of 30/6/15.

For more information please contact your local J.P. Morgan representative

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This is a promotional document and is intended to report solely on investment strategies and opportunities identified by J.P. Morgan Asset Management and as such the views contained herein are not to be taken as an advice or recommendation to buy or sell any investment or interest thereto. This document is confidential and intended only for the person or entity to which it has been provided. Reliance upon information in this material is at the sole discretion of the reader. The material was prepared without regard to specific objectives, financial situation or needs of any particular receiver. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are those of JPMorgan Asset Management, unless otherwise stated, as of the date of issuance. They are considered to be reliable at the time of writing; they may be subject to change without reference or notification to you.

Any investment decision should be based solely on the basis of any applicable local offering documents such as the Prospectus, annual report, semi-annual report, private placement or offering memorandum. For further information, any questions and for copies of the offering material you can contact your usual J.P. Morgan Asset Management representative. Both past performance and yield may not be a reliable guide to future performance. There is no guarantee that any forecast will come to past.

Any reproduction, retransmission, dissemination or other unauthorized use of this document or the information contained herein by any person or entity without the express prior written consent of J.P. Morgan Asset Management is strictly prohibited.

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